Labour and the single market: The Brexit debate that threatens to tear the party in two

Labour conference lays bare the party's divisions over
Brexit and the single market.Pro-EU Labour MPs tell BI Corbyn cannot deliver on his
manifesto if Britain leaves the single market.But many Labour MPs are worried about the issue of
immigration.Labour's elections chief: the single market debate
could tear the party in two.

BRIGHTON, EAST SUSSEX - On the face of it Labour appears more
united now than it ever has been under the leadership of Jeremy
Corbyn.

As Labour MP Lisa Nandy told Business
Insider on the eve of the annual get together, the argument
about Corbyn's leadership was "effectively over."

However, while there is no doubting Labour is in its best shape
for years, a big debate is brewing beneath the surface that
threatens to split the party right down the middle - should
Brexit mean leaving the single market?

As the party's chief elections strategist, Andrew Gwynne,
told a fringe event
this week, it's a question that could tear the party apart.
That's because it's not just a question about Britain's future
with an EU institution - it's much more than that. For Labour
MPs, it's a question of Labour values, and how Labour politics
ought to be applied in 2017.

This was clear in remarks exchanged by MPs Alison McGovern, who
wants to stay in the single market, and Kelvin Hopkins, one of
the few Labour leavers (also known as "Lexiteers") in a fringe
hosted be Open Britain on Tuesday. McGovern suggested leaving the
single market would mean "finishing what Thatcher started," while
Hopkins portrayed the EU as a Thatcherite regime, describing it
as a "neoliberal construct that ought to be challenged."

McGovern inhabits a wing of the party alongside MPs like Chuka
Umunna, Heidi Alexander, Stephen Kinnock and others who are
urging Corbyn to make remaining in the single market party
policy. Labour Brexiteers like Hopkins belong to a much smaller
club. However, a much larger number of Labour MPs represent
Leave-voting constituencies. And for many of those MPs, the
prospect of staying in the single market, and the likelihood of
accepting the free movement of people by virtue of that
commitment, is one that makes them increasingly anxious.

The progressive dilemma

For Alexander, MP for the London constituency of Lewisham East,
Labour simply will not be able to deliver the policies promised
in its progressive election manifesto if Britain leaves the
single market as part of its exit from the EU. "It's not
sustainable," she told BI in Brighton.

"If you look at the analysis that was done by the Treasury before
the referendum, they set out a number of different scenarios and
what the impact on the public finances would be. We are in the
world of least damaging options.

"That analysis in February 2016 suggested that an EEA system
would hit public finances around £20 billion over 15 years; a
Canadian style free trade deal would hit public finances by £36
billion; crashing out on WTO terms would mean £45 billion in
potential impact. £45 billion is the equivalent of five teams of
annual spending on GPs. It's the same as three times annual local
authority expenditure on social care."

She added: "I don't think you can afford an anti-austerity agenda
if you're not in the single market."

Kinnock made the same point, describing it as the "600lb gorilla
in the room" when he spoke to BI.

"You can have all of the very progressive, radical policies that
you like in your manifesto, but if the fundamentals of your
economy are going to hit the wall, then it just isn't
sustainable," the MP for Aberavon said.

Hopkins shrugged off these concerns at the Open Britain fringe.
"Where are the jobs going to be lost? I don't see where they are
going to be lost [from leaving the single market,]" he said,
while McGovern and Umunna looked at each other in disbelief.

The MP for Luton North made the case for why leaving the single
market is progressive, claiming that being a member makes it more
difficult for state governments to nationalise industries, and
imposes restrictions on state aid. Corbyn expressed these worries
himself in interviews last
weekend. Labour's single market backers dismiss this, with
Umunna describing them as "complete nonsense."

The EEA question

Alexander has taken the fight for the single market to the House
of Commons. The former shadow health secretary has tabled an
amendment to the EU Withdrawal Bill calling on the government to
give Parliament a vote on whether Britain should leave the European Economic
Area (EEA). The Bill's third reading will take place later
this year.

The EEA, which Britain is a member of, allows Norway, Lichenstein
and Iceland to participate fully in the single market despite not
being in the EU. Alexander, Kinnock and others argue that
Britain's membership of the EEA is separate from its EU
membership, so the government must get parliamentary approval
before taking Britain out of the former. By staying in the EEA
beyond Brexit day Britain would, in theory, stay in the single
market. The government's legal team has claimed that
Britain's EEA membership is not separate from its EU
membership.

Alexander is confident the amendment has the potential to attract
a significant amount of cross-party support. "I've spoken to a
number of Conservative MPs who are interested in the whole idea
of the single market and EEA," she said.

"There is a fundamental democratic question at stake here. We had
Article 50 triggered on the back of a full act of parliament.
Coming out of the EEA is separate from the EU. If the government
wishes to take the UK out of the EEA, it's MPs who should
determine that and not David Davis behind his desk in
Westminster. Under the EU Withdrawal bill, there is nothing to
stop a minister deciding to trigger Article 127 of the EEA
Agreement and take us out of the EEA. I think that's
fundamentally wrong."

Kinnock, who is one of to the amendment's supporters, told BI
that the Gina Miller case "established legal precedent" which
means Prime Minister May has no choice but to give MPs a vote
before taking Britain out of the EEA.

He added: "The big question here is that what are those pro-EU
Tories willing to do? How far are they prepared to go? I can
absolutely understand how difficult it is for them but they're
going to have to make a decision."

Immigration, immigration, immigration

Umunna told the Open Britain fringe that the pro-single market
movement has in recent months become more organised and developed
a more coherent message. This is undoubtedly true. But even
within this internal Labour grouping, there is a fundamental
disagreement over a key aspect of the single market debate:
Immigration.

"This is perhaps where I diverge to some extent," Kinnock said.
Kinnock, a newly-appointed member of the Brexit committee,
believes one of the biggest advantages of the EEA model is it
would allow Britain to remain in the single market while free
itself from EU rules and bodies, like the ECJ, Common Fisheries
Policy, and free movement of people. "The key point for me
is that EEA is emphatically not the single market," he said.
In particular, it offers the possibility of imposing
emergency breaks on any of the single market's four freedoms,
including the free movement of people.

"Why is it we believe in regulating the banks and not regulating
the inward flow of labour from the EU?" he added.

"It's a market like any other market and it needs to be
regulated. We also need to think about how many communities have
felt left behind by globalisation that we are elected to
represent.

"I know that colleagues say there is a lot more we can do within
current EU regulations to limit inward migration, but these
measures are too far downstream. We need an upstream approach to
regulating free movement. We are a whole nation party and the
views on this issue in the big metropolitan cities is a lot to
different to in places like my constituency."

Alexander, in her own words, takes a different view. "I don't
believe we should be sacrificing our economy on the altar of
concerns about immigration," she told BI.

"I'm also concerned that the debate about immigration has been
misleading over the last few years in the UK. We control
immigration from countries which account for 90% of the world's
population. We have a more relaxed for 10% that live within the
EU. Now, instead of immediately accepting the argument that we
have to curb immigration, we need to think about the costs of
decreasing the number of EU migrants who come here.

Keir Starmer's announcement that a Labour government would keep
Britain in the single market during transitional period suggests
that the pro-single market position is winning for now. "That
side of the debate is certainly making a lot of noise and is
getting lots of traction," Kinnock said.

But even though support for retaining close trading ties with
Europe is growing within Labour, the question of what to do about
immigration remains hanging in the air, even among the party's
biggest supporters of the single market.